Key Takeaways:
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- Accelerated Price Drop: New-home prices in 70 Chinese cities (excluding state-subsidized housing) fell 0.27% from May, the steepest decline in eight months, while second-hand home values dropped 0.61%, the largest since September.
- Weakening Market Trend: Analysts note a “clear trend of market weakening” in June, with residential sales slumping 12.6% year-over-year, the sharpest decline this year, and real estate investment tumbling 11.2% in the first half.
- Impact on Economy: The prolonged housing downturn is stifling efforts to boost consumer demand and shore up the broader economy, especially as exports face risks from trade tensions with the U.S.
- Calls for Policy Support: Speculation is growing for additional policy measures to revive the property market, with a higher likelihood of announcements during the upcoming July Politburo meeting.
- Developer Struggles: Major developers like China Vanke Co. are facing significant losses, with the company projecting a first-half loss of up to $1.7 billion*.
What Happened?
China’s National Bureau of Statistics reported that new-home prices in 70 cities experienced their fastest decline in eight months in June, falling by 0.27% from May. Prices for second-hand homes also saw their largest drop since September. This data underscores a deepening downturn in China’s property market.
The weakening market is evident in slumping residential sales and a significant drop in real estate investment. This prolonged slump is hindering broader economic recovery efforts and intensifying calls for more government stimulus measures.
Why It Matters?
The continued decline in China’s property market is a significant concern for the country’s economic stability. The real estate sector is a major contributor to China’s GDP, and its downturn directly impacts consumer confidence and spending.
The situation is exacerbated by ongoing trade tensions, which threaten export stability. Without a robust property market, China faces challenges in achieving its economic growth targets and ensuring overall financial stability. The mounting calls for policy support highlight the urgency of the situation for Beijing.
What’s Next?
Investors and analysts are closely watching for potential policy interventions from the Chinese government, particularly during the upcoming July Politburo meeting. Premier Li Qiang has already pledged to end the real estate decline, suggesting that a new stimulus package could be on the horizon.
However, some economists believe Beijing might delay major support measures to preserve policy flexibility, especially given the temporary trade deal with Washington expiring in mid-August. The effectiveness and timing of any new measures will be crucial for the property market’s recovery and the broader Chinese economy.
